IN A NUTSHELL: “Confidence is rising, but there is some uncertainty about the future setting in.”

WHAT IT MEANS:As the year grinds on and the economy continues to improve slowly, the euphoria about the future is beginning to wane. The Conference Board reported that consumer confidence rose in June, reversing a decline seen in May. The key to the increase was a jump in the impression about current conditions. Consumers felt that both business conditions and the labor market improved solidly over the month. Importantly, the percent of people saying jobs are plentiful kept rising while those feeling that jobs were harder to get declined. However, the outlook about the future, while still solid, is not as optimistic as it had been. Fewer respondents expected business conditions to improve and there was an increase in those who expect jobs to be harder to get in the future.

Home prices have been rising much faster than inflation and the question being raised is: How long can that continue? Well, one measure, the S&P CoreLogic Case Shiller national home price index did jump in April, but over-the-year, the gain was a little slower than in March. Indeed, the change from last year has been in a fairly tight range for the past five months, varying between about 5.4% and 5.6%. Other indices are still showing signs of accelerating housing price gains, so we need to wait before we conclude the situation is stabilizing.

MARKETS AND FED POLICY IMPLICATIONS:The second quarter is coming to an end and there are few indications that growth was robust. The consumer didn’t buy motor vehicles at any great rate in April and May. Yesterday, it was reported that durable goods orders declined in May and most of the manufacturing reports coming from the regional Federal Reserve Banks have pointed to slowing manufacturing activity. The trade deficit doesn’t look like it will be shrinking much, if at all, so don’t look to the foreign sector for much help. Maybe inventories built, but if that was due to slower sales than expected, it isn’t a positive sign for the economy. And why would business invest heavily? Demand is not growing rapidly and it only makes sense to wait until the tax changes, if any, are known before making a decision. To change things around, the consumer will have to spend more and while it is nice that people think current conditions are improving, it would better if they were becoming more, not less confident about the future. So, investors will have to find something else, if they actually need something, to drive markets up further. But with two hikes under their belt, the Fed members may want to see better growth before they make the next move this year.

Joel L. Naroff is the president and founder of Naroff Economic Advisors, a strategic economic consulting firm.